Momentum Slows as Stocks End the Week Lower

June 3, 2024

Market Data as of Week Ending: 5/31/2024 unless noted otherwise

U.S. equity markets ended the week marginally lower as economic data supported the narrative of a strong economy with slowing inflation. The S&P 500 was 0.49% lower on the week, driven by losses in information technology stocks, which retreated from outsized gains from the previous week. Year-to-date size and style trends reversed as value stocks outperformed growth and small and mid-cap stocks outperformed large-cap. Six of the eleven S&P 500 sectors were positive for the week, led by energy, which was driven higher by elevated oil prices. Interest rate-sensitive sectors also outperformed as the mid-week spike in long-term rates normalized by Friday. Developed foreign equities were flat, as European economic data suggests, as inflation remains sticky and the path of interest rate policy remains uncertain. Emerging markets were lower for the week, with the MSCI EM down -3.10%.

Fixed income performance was mostly unchanged for the week. Weaker-than-expected Treasury auctions and comments from Fed President Neel Kashkari contributed to interest volatility during the week. The 10-year treasury ended the week slightly higher at 4.51%, having reached as high as 4.61% mid-week. The slight increase in yields led to outperformance in short-term bonds. Yields on U.S. Corporates and High Yield ended the week relatively unchanged at 5.52% and 8.18%, respectively.

Economic data released during the week painted a picture of easing inflation and a resilient economy but a slightly weaker consumer. Core PCE, the Fed’s preferred inflation measure, increased 0.2% in April. This was in line with forecasts and a deceleration from the 0.3% increase in March. The second estimate of Q1 GDP growth of 1.3% was revised lower from the 1.6% advanced estimate. The Q1 GDP reduction primarily reflected downward revisions to consumer spending. Personal spending was lower than forecasted and increased 0.2% in April; this marked a considerable deceleration from the downwardly revised 0.7% increase in March. Both wholesale and retail inventories increased in April. Despite a deceleration in consumer spending and building inventories, consumer confidence increased in May after three months of declines.

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